Buying on Alibaba Guide: Price Negotiation, Payment, & ShippingMay 14, 2018 in Blog, Buying Products, Chinese Importing, Finding Suppliers
Updated in May, 2018 with up to date information for buying from Alibaba in 2018.
Alibaba is the place to go when looking for Suppliers to buy private label products in China from. Using Alibaba, on the surface, seems relatively straight forward. But how do you find reliable suppliers, negotiate with them, and get your products shipped? In this article we’ll cover all of these things.
In this article we will not cover how to find great products to import from China. If you’re looking for products to import, I recommend you check out the article below.
Related reading: How to Find the Perfect Product to Import from China and Sell Online.
What is Alibaba? Alibaba.com vs AliExpress vs Alibaba Group
Alibaba.com is essentially a directory of Chinese factories and trading companies in China. It is the resource for finding Suppliers in China and in fact even Chinese companies use it.
Alibaba Group (founded by Jack Ma) though is a massive conglomerate of different web properties including Alibaba.com, Aliexpress(a website for foreigners to buy products from China) and Taobao (China’s version of Amazon). Of all of Alibaba Group’s different properties though only Alibaba.com is of relevance for importers (some ecommerce sellers use Aliexpress because it allows ordering of low quantities but the prices are very high).
Is Alibaba Safe?
The question I probably hear the most about Alibaba is, “Is Alibaba safe to use?”. The answer is that yes, Alibaba is safe to use but with one caveat regarding quality (which I’ll get to in a second). If you order from Alibaba, as long as you follow some normal precautions you will almost certainly always receive your products. In nearly ten years of using Alibaba I have orders millions of dollars worth of products from dozens of Suppliers and I’ve never been scammed. Some basic precautions to follow:
- Order from Chinese companies only
- Buy from Gold Suppliers only
- Making payment via wire transfers is normal but always make sure the beneficiary name matches the company name
- Order small at first and gradually increase your order size
If you follow these basic guidelines you will almost certainly not be scammed.
Now, the caveat I mentioned regarding quality. Receiving inferior quality products in China are a very big concern when ordering on Alibaba. Stereotypes are sometimes true, and the crappy “Made In China” products stereotype can be true if you do not follow some fairly easy best practices. When you’re reading to order products, review our article below on ensuring quality products.
Related reading: How to do a Quality Inspection and Why You Need One
Types of Suppliers on Alibaba
On Alibaba there are two types of Suppliers, Gold Suppliers and non-Gold suppliers. A Gold supplier pays a premium for increased ranking, marketing services, etc. and Alibaba does some limited identify verification of these Suppliers. A Gold Supplier on Alibaba does not mean this Supplier has good quality products but it does give some indication this Supplier is a semi-legitimate and somewhat invested seller. I personally try to work only with Gold Suppliers simply as a filter mechanism but remember that a Gold Supplier does not mean they are an excellent Supplier.
Alibaba is also open to both Chinese companies and non-Chinese companies, although Chinese Suppliers make up the vast majority of Suppliers. Suppliers can also come in the form of trading companies and factories. A trading company does not manufacture the products they produce and generally have slightly higher prices but also slightly more consistent quality and a larger product selection. Factories have slightly lower prices and more limited selection and more unpredictable quality. Neither are good nor bad inherently but know the differences between these types of Suppliers.
Related reading: Trading Company vs Factory – Types of Suppliers in China
How to Find and Contact Suppliers on Alibaba
Once you know what product you want to search for on Alibaba go ahead and search for the product. Your ultimate goal when looking for Suppliers should be to find 3-5 potential Suppliers, contact them, and get price quotes for your product.
The first thing I do when starting a search is to have my results sorted by Supplier, not by product (which Alibaba will do by default) otherwise the top search results will be dominated by one or two Suppliers. See the image below.
You want to look for Suppliers who have products similar to what you’re looking for. Keep in mind, many Suppliers simply steal photos of Western brand’s products. I like to look for signs that the photographs are authentic, such as:
- Signs the photo was taken in China (i.e. Chinese people or writing in the photograph)
- Company watermark on the photo
- Good photos but not too good (most Suppliers don’t take ‘retail’ quality photographs)
How to Contact Suppliers
Possibly the biggest mistake I see new importers make when contacting Chinese Suppliers, especially on Alibaba, is to believe every Chinese Supplier is dying to do business with them. This isn’t always true. You will see on the search results page the Supplier Response Rate. You will almost always see that this Response Rate is far lower than 100%. Alibaba Suppliers will often simply ignore many buyer requests.
For a lot of Chinese Suppliers, Alibaba is a lot like using an internet dating website. A Supplier with a great profile page and selling high demand products, a.k.a. the proverbial hot girl, may get dozens or hundreds of inquiries a day. And just like internet dating, not all of these inquiries lead to dates, or in our case, orders. Therefore, Chinese Suppliers are selective in who they respond to and even more selective in who they give their best prices to. Therefore, you have to come across as a ‘good catch’. What are some things Chinese Suppliers look for?
- Do you know exactly what products you’re looking for? Or are you fishing for an entire catalog and price list?
- Are you clear, concise, and to the point? Or does your Supplier have to put a lot of thought into answering your email, which is especially hard for a non-native English speaker?
- What country are you from? Certain countries are more desirable for a Supplier to do business in such as countries the Supplier doesn’t currently do business in. Your Supplier can see what country you are emailing from via Alibaba.
- Are you a big buyer with brick and mortar stores?
In my first email, I aim to ask only a couple of questions about a product, specifically the price and maybe a simple product specifications question. Do not overwhelm them with a lot of questions in your first email. Also remember English is a second language for Suppliers and each response from them takes a lot of time. I also ask them for the WeChat ID – almost everyone now in China prefers to communicate over WeChat over email or other means. If you’re serious about importing from China download WeChat for your phone immediately (it’s free)
Sample email to Supplier
I am from Chinese Importing Products Inc. We are based in Vancouver, Canada and we are a retailer/wholesaler of Horse Saddles. We are very interested in the Horse Saddles your company offers.
Can you please tell me the price on your Adjustable Leather English Horse Saddles, Mode SA138, as shown here: http://shanghaisaddlery.en.alibaba.com/product/736255569-214759027/adjustable_gullet_english_leather_saddle.html
My goal is just to get a response. I avoid mentioning MOQs which may scare off a Supplier. It’s easy for a Supplier to simply ignore an initial email. But once a Supplier has actually responded to you, it’s difficult to ignore future emails. If they add you to WeChat it’s almost impossible for them to ignore you.
Price Negotiation and Analysis
Unless you know your product extremely well and the cost to manufacture it (VERY few people know this) your absolute only way to know the fair price of your product is to receive competing offers which is why we’ve contacted several Suppliers.
You should at this point start to receive prices from your Suppliers. If they ask you how much you will be importing let them know your ideal annual order amount (be an optimist but don’t promise the moon) rather than individual order amount.
The chances are you will receive very comparable prices, i.e. ranging from $28.40-$36.40. Chinese Suppliers are very good at knowing how much their competitors are charging and therefore will price themselves competitively, especially if they want to do business with you. Record each Supplier’s price, MOQ, and shipment terms either in a spreadsheet like here or other simple word processing document. It might seem trivial, but it forces you to compare each Supplier equally.
Beware of Suppliers that have very low prices relative to others. Normally there is a catch. Typical catches include:
- Shipment terms are EXW opposed to FOB (much more expensive)
- The material is of a much lower quality, i.e. 150 denier fabric instead of 600 denier Fabric
- They only accept extremely large orders
Once you are comparing apples to apples, i.e. you know each Supplier is quoting a product constructed of similar materials and with similar shipment terms, then ask the other Suppliers if they can match the price of the lowest offer. There’s a temptation to lie and say “Your competitor Ningbo Saddles offered me these saddles for $24” when in fact they offered them to you for $34. Your Supplier will smell you out and you’ll lose credibility. There is not as much room for price negotiation in China as there was previously. A 10% price discount is often huge.
At this point you will likely have 2-3 Suppliers with comparable prices and comparable products. At this point, you want to find a Supplier that can accommodate your smaller order size.
How to Negotiate Minimum Order Quantities (MOQ)
MOQ is one of the most important issues you’re going to face when first dealing with Suppliers. I’ll give you some general tips here on how to get low MOQs and we go into even more detail in our courses. Every Supplier wants you to order like Walmart but at the same time, you don’t want to import 50 Horse Saddles if you’ve never sold one and risk getting stuck with a bedroom full of unsellable inventory.
You have to ask yourself, why does you Supplier have a MOQ?
- They mass produce the product, and keep stock of it, but it’s not worth their expense to ship a small number of products
- They only produce the product on demand therefore they need a big enough order to warrant a production run
If an item is customized or a very niche product that your Supplier does not keep stock of, then MOQs are tricky. It’s very difficult to negotiate as quite simply your Supplier will lose money (not just time) for small orders.
If you’re dealing with a popular product and/or dealing with a trading company, the chances are good that their MOQ falls into the first category. In these cases, small orders are just not worth their time. Maybe they can sell me 10 horse saddles and still make $100 profit, but they have higher priorities.
In these cases, all you need to do is decrease their cost of time. Assume you have narrowed down your selection process to 1 or 2 Suppliers and both insist their MOQ is 50 units but you only want 10 units. The following email will get your Supplier to accept your order more often than not:
I understand your MOQ requirements but we would like to purchase 10 saddles initially to introduce to our customers and proceed with a larger shipment on the next order.
If you can understand our needs, please see the attached PO for 1o units of SA138. Please confirm with a copy of your invoice which includes FedEx shipping charges to Vancouver, Canada. Also please include your banking information and I will wire 100% payment to you tomorrow.
Thank you and I look forward to working with you on many future orders,
Very few Suppliers can say no to having money wired to them in full.Note that when you do this strategy, you have very little room for negotiation. The second you start to try to negotiate price, payment terms, etc. you’re imposing a money cost and time cost on your Supplier.
If you have access to a tool like Import Genius, you can get a good feel for how amicable your Supplier is going to be to smaller orders by seeing the Supplier’s export history.
For example, by searching for Shanghai Saddlery company, we can see that in the past, they did an order to Blocker Ranch Inc. for just 41 units. This is a good indication they would likely accept an order from us for around 41 units (or much less).
Order Several Samples Instead of One Sample
Many books and websites say that you should always order a single sample from a Supplier and inspect it for quality et al. There’s some problems with doing it this way:
- Your first sample is guaranteed to be of good quality. i.e. you will get the “Golden Sample”
- The freight costs to get a single sample is outrageously high
- One sample gives you no chance to try and sell the item on eBay, Amazon, etc.
Therefore, I always recommend people to order at least 10 of an item if possible at first. At the very least, this gives you a chance to sell the items on eBay or Amazon. If you import one sample and sell it the very first day on Amazon you may have simply lucked out. Selling ten is a far better sample size.
How to Make Payment to Suppliers
Once you’ve picked a Supplier and they’ve agreed to send your desired quantity you’re ready to pay for and ship your order.
Keep in mind that some Suppliers may not charge you for the cost of one sample but they will almost certainly get you to pay the cost of freight. They will almost certainly charge you for any samples beyond one and the cost freight. Do not try to negotiate this- it makes you look really small. However, most Suppliers will promise to pay you back this sample and freight cost on your first real order – make sure you remember to ask for this money back.
Most Suppliers will send you something called a pro-forma invoice which is just a fancy word for an invoice. Most Suppliers prefer wire transfer but some will accept PayPal if you pay their fees (anywhere from 2.5-4%). Remember, everything in China is in USD as the Yuan is pegged to the Dollar. Many Suppliers will also accept payment directly through Alibaba’s Trade Assurance program but once your orders starting getting into the thousands of dollars they will shy away from this.
If you’ve never done an overseas wire transfer, take the banking information into your bank and they will be happy to help you make the transfer, normally for $20-40. Paying via Wire Transfer gives some very revealing information about your Supplier, mostly in regards to whoever the beneficiary is. If the beneficiary is the company name that you’re familiar with, i.e. “Shanghai Saddlery Co. Ltd.” then everything is hunky dorey. If the beneficiary is a personal name, i.e. “Deng Xiaoping” then you know you’re most likely dealing with a very small middle man. Fraud is also a lot more prevalent if going to a personal name (although still very rare) so make sure there’s no other red flags. If you’re being asked to send money to an African bank, run.
How to Ship Your Products from China
If this is your first time ordering from China (or even if you’re experienced) it’s often best just to ask your Supplier to arrange for shipping and to add the charges to the invoice. If everything is being shipped via air, then there’s really no surprises. Simply tell your Supplier your address. They will likely ship it via DHL, FedEx, or UPS. If your goods are being shipped to the U.S. and are valued at under $800 then there will be no duty charged because of America’s very generous de minimis rules.
Generally speaking, items under 100 lbs or so should go via air courier (i.e. UPS/DHL/FedEx/etc.). Expect to pay anywhere from $6-15 per pound. When larger than this, air freight and sea freight become more cost effective but also more complicated. Check out our article below.
Related Reading: How to Ship Your Goods from China via Sea Freight and Air Freight
If you are shipping your products to Amazon FBA check out our article on how to ship your products from China to Amazon FBA.
Related reading: How to Ship Your Goods from China to Amazon FBA
Receiving and Reviewing Your Shipment
If you’ve had your order shipped via air, then it should arrive in anywhere from 3-10 business days. If via sea, this will be more like 30-45 days. When your shipment arrives, here are some things to inspect, which may be talking points for future orders:
- Quality. Is the product the quality you expect? Use and abuse the product for a bit of time. Does it hold up how it should? If not, remember that you’ve likely received their best quality samples and quality is only expected to be the same or decrease on future orders.
- Packaging: Is the packaging sufficient to ship to your customer? Or was everything lumped into one box and you need to purchase all new shipping boxes? (if so, request your items to be boxed on future orders)
- Instructions. Did it come with instructions (if applicable)? If not, does your supplier have instructions? If not, you should start creating or borrowing some and include them with your product.
- Made in China? Does your item have “Made in China” marked somewhere on the box? If not, you should request this on the next order
Once you’ve received your order, you should email your Supplier to let them know that you received everything but you have not had a chance to review the products yet and let them know that you will contact them shortly to discuss things and to hopefully make another order. There’s no rush to do the above- just like in dating, playing hard is sometimes a good strategy.
This covers most of the basics of using Alibaba to find Suppliers and Products. If you want a more in-depth guide to starting an import and private label business I strongly suggest you check out our mega guide on How to Import from China.
Do you think Alibaba is still a good place to find Suppliers? Let me know below or share any other questions you have about buying from Alibaba.